The Securities and Exchange Board of India (Sebi) announced on Thursday that it is looking into potential violations by IndusInd Bank's senior management, including accounting frauds worth Rs3,400 crore.
Key Highlights
- SEBI investigates IndusInd Bank's senior executives over ₹3,400 crore accounting fraud and insider trading.
- Top-level resignations follow SEBI probe into serious violations by IndusInd Bank's leadership.
While the Reserve Bank of India (RBI) will conduct the primary investigation, the Sebi is specifically looking into alleged securities market violations by bank officials.
"The RBI is looking into what Sebi needs to do in relation to...whatever Sebi's mandate is...Sebi is doing... If there are any egregious violations by anyone in their capacity, Sebi will look into it," Sebi Chairman Tuhin Kanta Pandeyy told reporters at an Assocham industry event," according to PTI.
On Wednesday, IndusInd Bank's board acknowledged the suspected involvement of certain employees in the fraud and directed management to notify investigative and regulatory authorities.
The private sector bank is under investigation for fraudulent activities in derivatives, microfinance portfolios, and balance sheet disclosures. Following top-level resignations, the bank launched an internal audit review and forensic investigation.
Internal audit findings revealed that senior bank officials, including former Key Management Personnel, had circumvented critical internal controls. The bank has informed the central government of senior management's potential involvement in the accounting fraud.
IndusInd Bank confirmed that all identified discrepancies have been reflected in the financial results for the quarter and year ended March 31, 2025.
The March quarter saw multiple financial impacts, including Rs1,960 crore in incorrect derivative trades recognition, Rs674 crore in interest income reversal, Rs172 crore in microfinance-related fraud, Rs595 crore in manual entry correction, and increased slippages totaling Rs 3,400 crore.
In the March quarter of FY25, the bank recorded a net loss of Rs 2,329 crore, its poorest performance due to accounting irregularities in derivatives, microfinance, and assets/ liabilities. This was the first financial report following the disclosure of accounting irregularities.
Despite the poor quarterly results, IndusInd Bank shares recovered on Thursday, closing 1.82 percent higher at Rs 785.10 on BSE, following a 5.89 percent decline to Rs 725.65.
In another bank-related development, defence PSU Bharat Electronics Limited (BEL) will replace IndusInd Bank on the BSE Sensex following the index rejig.
Financial analysts predict that IndusInd Bank will perform poorly in the near future, and that the new MD and CEO will have a difficult time turning the bank around and winning back investor trust.
The bank's board appointed an Executive Committee to manage interim operations after CEO Sumant Kathpalia and Deputy CEO Arun Khurana resigned on April 29.
The Board must propose new MD candidates to the RBI by June 30.
